Comments on Alan Wood “We need securitisation”, 24/09/2009, http://www.theaustralian.news.com.au/story/0,25197,26116016-7583,00.html
There will be a role for residential mortgage backed securities (RMBS) when the storm of the round financial crisis has subsided and the financial market return to some normality.
The question for the relevant industries involved is what disclosures they have to make in terms of the underlying quality or risks of any such securities. Only in that way potential investors can be well informed and make the most proper decisions.
For the government, the question is if it has to buy some or all of such securities at bad times with the taxpayers bearing the risks, what should it do in good times to protect taxpayers who bailed out those security holders?
There should be some symmetry between risks to taxpayers and benefits to them. How the taxpayers can recoup enough benefits from good times to prepare for bad times? Or would the government commit itself not to bail out again in the future?
Another point is from regulation point of view, what the government should do to reduce the risks of any RMBS to potential investors, or at least to make the risks very transparent?
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